Book review: Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street

By Jackie Calmes / NY Times News Service, New York

Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street, by Neil Barofsky.

From the opening of this latest book on the government’s (mis)handling of the 2008-09 financial crisis, Neil Barofsky establishes his populist narrative from his two-plus years as the “TARP cop” overseeing the US$700 billion big-bank bailout officially known as the Troubled Asset Relief Program.

Barofsky, a former New York City prosecutor, is the idealistic alien sent in an emergency to Planet Washington, where he does battle with the self-important, self-serving powers entrenched there or simply taking a spin through its revolving door to Wall Street. He is SIGTARP (in Washington-speak, the Special Inspector General for TARP). But ultimately he is outmatched, and evil triumphs over good.

In the preface to Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street, it is April 2010, and after more than a year on the job, Barofsky is meeting for a clear-the-air drink with one of his nemeses, Herbert Allison, the former head of the financial giants Merrill Lynch, TIAA-CREF and Fannie Mae, who came out of retirement to run the bank-rescue program for the Treasury Department. Barofsky, wearing an unseasonal wool suit at odds with a “Washington-appropriate wardrobe,” is poised to let the hostess seat them at a front table of her choosing, but Allison insists on a private table in the rear. Then he gets down to business.

“Have you thought at all about what you’ll be doing next?” Allison asks Barofsky, soon adding, “Out there in the market, there are consequences for some of the things that you’re saying and the way that you’re saying them.”

“Allison was essentially threatening me with lifelong unemployment,” Barofsky concludes, and alternatively suggesting a plum government appointment some day if Barofsky would simply “change your tone.”

Publication Notes

Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street

By Neil Barofsky

270 pages

Free Press

Harkcover: US

When Barofsky tells his deputy of the exchange, the deputy says, “It was the gold or the lead,” resorting to the lingo of their joint experience prosecuting Latin American drug kingpins in New York: Cooperate and share the riches, or don’t and get plugged. (With such frequent asides between the two buddies, Barofsky seeks to lighten what is by definition his otherwise numbingly complicated subject.)

Yet Barofsky goes on to say that he did not really think that Allison was threatening him; in fact, Allison “was, in a very Washington way, sincerely trying to be helpful.” This introductory episode not only sets the book’s tone, but it also embodies the contradictions and inconsistencies throughout Barofsky’s account.

He writes early on that “I had no idea that the US government had been captured by the banks,” and at another point describes his strategy to use the press to get the attention of Congress, and by extension an obstreperous Treasury: “Our message was simple: Treasury’s desperate attempt to bail out Wall Street was setting the country up for potentially catastrophic losses.”

Yet despite such repeated condemnations of the decision-making process in both the Bush and Obama administrations, Barofsky never really concedes that the predicted losses did not occur.

He refers throughout to the US$700 billion bailout, never clarifying that less than US$300 billion of that amount went out the door by the time TARP expired; that not a penny went to banks during the Obama administration; and that the big banks repaid taxpayers with interest.